Venture Capital Investments Have Biggest First Quarter Since 2000 by PWC

Total equity investments into venture-backed companies

Venture capitalists invested $48.3 billion in 4,356 deals in 2014, an increase of 61 percent in dollars and a 4 percent increase in deals over the prior year, according to the MoneyTree™ Report by PricewaterhouseCoopers LLP (PwC) and the National Venture Capital Association (NVCA), based on data from Thomson Reuters. In Q4 2014, $14.8 billion went into 1,109 deals.

Internet-specific companies captured $11.9 billion in 2014, marking the highest level of Internet-specific investments since 2000. Additionally, annual investments into the Software industry also reached the highest level since 2000 with $19.8 billion flowing into 1,799 deals in 2014. Dollars going into Software companies accounted for 41 percent of total venture capital investments in 2014, the highest percentage since the inception of the MoneyTree Report in 1995.

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Venture capital investments by industry 2013 to 2014

The Software industry maintained its status as the single largest investment sector for the year, with dollars rising 77 percent over 2013 to $19.8 billion, which was invested into 1,799 deals, a 10 percent rise in volume over the prior year.

Biotechnology investment dollars rose 29 percent while volume decreased 4 percent in 2014 to $6.0 billion going into 470 deals, placing it as the second largest investment sector for the year in terms of dollars invested. The Media and Entertainment sector accounted for the second largest number of deals in 2014 at 481, however it was third largest in terms of dollars invested with an annual total of $5.7 billion.

Overall, investments in 2014 in the Life Sciences sector (Biotechnology and Medical Devices combined) rose to the highest level since 2008 with $8.6 billion invested into 789 deals, a 29 percent increase in dollars but a 3 percent drop in deals compared 2013. Dollars invested into Life Sciences companies accounted for 18 percent of total venture capital investments in 2014.

Internet-specific companies experienced a 68 percent increase in dollars but a 6 percent drop in deals for the full year 2014 with $11.9 billion going into 1,005 rounds compared to 2013 when $7.1 billion went into 1,074 deals. The amount of funding in 2014 marked the highest level of Internet-specific investment since 2000. ‘Internet-specific’ is a discrete classification assigned to a company whose business model is fundamentally dependent on the Internet, regardless of the company’s primary industry category. These
companies accounted for 25 percent of all venture capital dollars in 2014.

Fourteen of the 17 industry categories experienced increases in dollars invested for the year. Industry sectors experiencing some of the biggest dollar increases for 2014 included: Retailing/Distribution (265 percent); Computers and Peripherals (132 percent); Electronics/Instrumentation (128 percent); and Financial Services (109 percent).

Venture capital investments

Venture capital investments by industry Q4 2013, Q3 2014, and Q4 2014

Software remained the number one sector in Q4 for both dollars invested and number of deals with $5.8 billion going into 461 deals, nearly four times the number of deals than the second highest volume sector, Media and Entertainment. Rising by 53 percent in dollars and 7 percent in Q4, Software has held the number one spot in terms of dollars invested for 21 straight quarters.

For the fourth quarter, $3.0 billion went into 236 Internet-specific deals, representing a decrease of 7 percent in both dollars and deals.

In Q4, the Life Sciences sector captured $2.8 billion going into 202 deals, a 62 percent increase in dollars invested, while deal volume remained relatively flat compared to Q3 2014.

Thirteen of the 17 industry categories experienced increases in dollars invested for the year. Industry sectors experiencing some of the biggest dollar increases for Q4 included: Computers and Peripherals (1,140 percent); Networking and Equipment (421 percent); and Business Products and Services (304 percent).

Venture capital investments

Venture capital investments by stage of development 2013 to 2014

Expansion Stage investments captured the most investment dollars in 2014, increasing 102 percent to $19.8 billion which flowed into 1,156 deals, a 13 percent increase compared to the prior year. Expansion Stage companies attracted 41 percent of dollars and 27 percent of deals in 2014 compared to 33 percent of dollars and 24 percent of deals in 2013. The average Expansion Stage deal in 2014 was $17.1 million compared to $9.6 million in 2013.

Investments in Early Stage companies accounted for the most deals during 2014 with 2,165 deals capturing $15.8 billion. While the number of deals remained relatively flat in 2014 compared to the prior year, the dollars invested rose 54 percent over the same time period. Early Stage companies attracted 33 percent of dollars and 50 percent of deals in 2014 compared to 34 percent of dollars and 51 percent of deals in 2013. The average Early Stage deal in 2014 was $7.3 million, up notably from $4.8 million in 2013.

Seed Stage investments fell 29 percent in terms of dollars and 18 percent in deals with $719 million going into 192 companies in 2014, the lowest number of Seed deals since 2002. Seed Stage companies attracted 1 percent of dollars and 4 percent of deals in 2014 compared to 3 percent of dollars and 6 percent of deals in 2013. The average Seed Stage round in 2014 was $3.7 million, down from $4.3 million in 2013.

In 2014, $12.0 billion was invested into 843 Later Stage deals, a 35 percent increase in dollars and a 6 percent increase in deals for the year. Later Stage companies attracted 25 percent of dollars and 19 percent of deals in 2014 compared to 30 percent of dollars and 19 percent of deals in 2013. The average size of a Later Stage deal rose from $11.2 million in 2013 to $14.3 million in 2014.

Venture capital investments

Venture capital investments

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